Three weeks after Apple was declared responsible for leading a conspiracy to raise e-book prices, the Department of Justice (DOJ) today submitted a proposed remedy to prevent the company from fixing prices and discriminating against competitors such as Amazon and Barnes & Noble.

Apple should not be able to "discriminate against rival e-books apps and may not agree with any other e-book retailer to fix retail e-book prices," the proposal (PDF) says. The specific remedies would, among other things, make it easier for iPhone and iPad users to buy books for use on Amazon's Kindle and Barnes & Noble's Nook apps.

Those apps don't include a way for users to purchase books today, largely because if they did, Apple would demand a 30 percent cut on sales. Amazon and Barnes & Noble apps aren't even allowed to provide links to purchase pages unless they also make the books available as in-app purchases, with Apple getting that 30 percent cut.

Users of the Kindle and Nook iOS apps can exit the app, open the device's Web browser, navigate to Amazon's or Barnes & Noble's website, purchase books, and then go back into the Kindle or Nook app and download them. But a direct connection between the apps and purchasing mechanisms does not exist today.

That would change under the proposal from the DOJ and 33 state attorneys general:

[The proposal] requires Apple, for two years, to permit any e-book retailer to include in its e-book app a hyperlink to its own e-bookstore, without paying any fee or commission to Apple. This section thus requires Apple, for a relatively brief period of time, to return to its own pre-iBookstore policy of allowing Amazon, Barnes & Noble, and other e-book app providers to offer a simple, costless means for readers to purchase e-books directly from the third party.

This provision is intended to reset competition among trade e-book retailers and deny Apple the benefits of its conspiracy. In 2011, shortly after adding Random House’s titles to the iBookstore, Apple forced its retailer rivals to remove the hyperlinks from their e-book apps (in order to avoid paying Apple a 30 percent commission on their sales). By doing so, Apple made it more difficult for consumers using Apple devices to compare e-book prices among different retailers, and for consumers to purchase e-books from other retailers on Apple’s devices. At the time, as a result of Apple’s collusive agreements, prices for the most popular e-books tended to be the same across retailers, and many consumers likely determined that shopping around for a better e-book price was a waste of time.

The DOJ proposal would also bar Apple "from entering into contracts that would, in any way, fix the price that any of its competitors charge for content." Apple would not be able to share information with publishers in attempts to take "collective action" that raises prices across the board. The proposed judgment would remain in effect for 10 years, but certain requirements will not last that long.

Apple would have to terminate the agency agreements with publishers that were crucial in the conspiracy. "Apple also is barred, for five years, from either enforcing its retail price MFNs [most favored nation contracts] against publishers or accepting limitations on its own ability to price-compete with respect to e-books," the DOJ's proposal states.

Finally, Apple would have to hire a full-time, internal antitrust compliance officer to make sure the company plays by the rules. "The PFJ [proposed final judgement] also calls for an External Compliance Monitor, appointed by this Court, with the authority to oversee Apple’s compliance with the PFJ, and to oversee Apple’s internal antitrust compliance provisions," the DOJ wrote. "Apple also will be required to provide to the United States and the Representative Plaintiff States reasonable access to Apple’s documents, information, and personnel."

No financial penalties against Apple are being proposed, but the DOJ said these remedies combined with requirements for publishers will be enough.

"Price competition has returned to the marketplace" because of previous settlements with the publishers accused of conspiring with Apple, the DOJ filing states. Penguin, HarperCollins, Hachette, Simon & Schuster, and Macmillan have agreed to repay $164 million to consumers who were overcharged. The publishers also were "required to terminate agreements that prevented e-book retailers from lowering the prices at which they sell e-books to consumers and to allow for retail price competition in renegotiated e-book distribution agreements," a DOJ announcement said.

UPDATE: Apple has filed a response in court, saying the "overreaching proposal would establish a vague new compliance regime—applicable only to Apple—with intrusive oversight lasting for ten years, going far beyond the legal issues in this case, injuring competition and consumers, and violating basic principles of fairness and due process."

The harms from the conspiracy were "already remedied by the publishers' consent decrees," Apple wrote. The restrictions placed on Apple's treatment of e-book apps is also unwarranted because "there was no evidence admitted at trial, or finding by the Court, that the conspiracy involved the App Store," Apple wrote.

Further, Apple contended that the DOJ proposal unfairly targets more than just books.

"Plaintiffs would prohibit Apple from entering into or maintaining 'any agreement with any E-book Publisher or supplier of any other form of content (e.g., music, other audio, movies, television shows, or apps) where such agreement likely will increase, fix, or set the price at which other E-book Retailers or retailers of other forms of content can acquire or sell E-books or other forms of content' for the entire ten-year period of the judgment," Apple wrote. "This absurdly broad proposal is not only disconnected from any evidence adduced at trial or findings made by this Court, but would open Apple up to liability in virtually every content market for the actions of content producers, over which it has no control."

158 Reader Comments

I don't think forcing Apple to allow links to competing bookstores without the 30% cut is fair at all. Would you be OK if Barnes & Noble were forced to give shelf space to Amazon for free, without getting a cut of the sales?

The "shelf space" in question here is in Amazon's own Kindle app, not in iOS itself, so Apple isn't being forced to give them "shelf space", Apple is merely prohibited from collecting a cut from the "shelf space" that Amazon provided for itself. If Microsoft had a policy that said any Windows PC application that linked to an online store had to give MS a 30% cut of all sales, that would be completely unreasonable in my opinion, yet that's exactly what Apple was doing with iOS.

Amazon is making the same play Walmart did, only this time on a bigger scale. Once Amazon is the only game in town, things aren't quite so pretty.

But there is no real estate/zoning issue in competing with Amazon as there is with Walmart: if someone wants to open an online store competing with Amazon they just have to register a domain and buy an SSL certificate.

I don't think forcing Apple to allow links to competing bookstores without the 30% cut is fair at all. Would you be OK if Barnes & Noble were forced to give shelf space to Amazon for free, without getting a cut of the sales?

Bad analogy. This case is more like a book seller forcing Barnes & Noble to give them 30% of all profit made on the same shelf as their book. Even that isn't a great one, but is much closer. Apple is making a product that they make huge margins on. After that point a user buying from Amazon costs them nothing, while the shelf space for Barnes & Noble does. Apple is in effect saying that they still own your device that you paid hundreds of dollars for. This isn't some abstract constitutional right they are violating, but it is something that the people have a right to say "No really, you can't do that".

A better analogy would be a car: you buy a new car, say a BMW. A week later you buy a music CD from Walmart to play in your car. BMW demands 1/3 of the price of the CD simply because they manufactured the car you'll be using the CD in

Now if only Apple were to lose a music price fixing case, we could buy Amazon MP3s from our iPhones and add them to our library w/o a PC...

If the music companies were able to set music prices that hot single would not be 1.29 from Apple it would be $2.99. The publishers were greedy and tried to get more bucks per best seller, but Amazon is no better now. The days of Amazon selling at the wholesale price are long over no matter what the contracts say. They are going to run the occasional sale but best sellers prices are not coming down.

"The publishers also were "required to terminate agreements that prevented e-book retailers from lowering the prices at which they sell e-books to consumers and to allow for retail price competition in renegotiated e-book distribution agreements," a DOJ announcement said"

So when does this go into effect? Because I'm still seeing books I want to buy on Amazon with "price being set by publisher."

And I agree with a couple of other posters here. This isn't a punishment. This is just a remedy for a situation created when Apple colluded with the publishers. A punishment would be something like barring Apple from selling ebooks for a year. Or some large monetary fine (which admittedly wouldn't be that much of a real punishment for Apple so much as symbolic). But do something to Apple for reaping the benefits of their collusion from the time this all began until now.

Meh, I've moved on from the Kindle Store. Will be interesting to see price competition again, but I doubt it would change which store I buy from. I still greatly prefer the iBooks app. I hope that Apple makes an app for the Kindle Fire just to mess with Amazon for this.

Confused though, book store links were never disallowed. Book sellers merely removed them in order to avoid paying Apple's cut, which admittedly was steep, but does this mean Apple can't get any money from sales made in book apps on their devices? Hmm, I'm a bit worried about what that will do to the ecosystem in general...

"The publishers also were "required to terminate agreements that prevented e-book retailers from lowering the prices at which they sell e-books to consumers and to allow for retail price competition in renegotiated e-book distribution agreements," a DOJ announcement said"

So when does this go into effect? Because I'm still seeing books I want to buy on Amazon with "price being set by publisher."

And I agree with a couple of other posters here. This isn't a punishment. This is just a remedy for a situation created when Apple colluded with the publishers. A punishment would be something like barring Apple from selling ebooks for a year. Or some large monetary fine (which admittedly wouldn't be that much of a real punishment for Apple so much as symbolic). But do something to Apple for reaping the benefits of their collusion from the time this all began until now.

This in essence does stop Apple from really "selling" ebooks for a while... There is no way Apple will be able to be able to take their 30% cut and still be competitive in this space... so they will have to either price their books out of competition or make little profit to still be competitive.

I don't think forcing Apple to allow links to competing bookstores without the 30% cut is fair at all. Would you be OK if Barnes & Noble were forced to give shelf space to Amazon for free, without getting a cut of the sales?

First and foremost however is that Apple is not being forced to "allow" links, they are being forced to stop charging for links. They were charging 30% for what is in essence a form and submit button (or a link), after colluding to raise prices so that Users were both paying more and being dissuaded from using their competitors (or their competitors were paying said 30%). That is, they made it significantly more difficult to use their competitors that weren't paying them a cut by forcing you to go through a rigmarole to get roughly equivalent prices (that were higher than they should be and equivalent only because of their collusion).

Said in yet another way, they were just found guilty of leading a conspiracy to raise prices of specific collections of bits, after attempting to use the legal system to inhibit a competitor and are now being forced to not charge 30% for the honour of allowing a basic HTML link in their competitors apps, on a device that you paid them (or your carrier) hundreds of dollars for.

I'm sorry, but you'll have to excuse me for not being terribly upset over poor Apple's self-made problems.

America, it seems, is now turning into a country that mocks, punishes and destroys its successful companies instead of praising, rewarding and encouraging them as we did in the past. America is turning into the UK. Sad.

It wasn't true the first time you said it; repeating it over and over won't make it any more true.

The sad thing is that there are plenty of people in the USA who do think that repeating the same thing over and over will make a lie the truth. I can tell you the political party they vote for

Excellent! Now let's see them take on the App Store. The notion that Apple should be the single distribution vector for other peoples' intellectual property is odious, anticompetitive, and harms not only developers (30% for WHAT, exactly?) but also the public.

Oh, like Amazon does on the Kindle?

This ruling would be fair if it went both ways. Clearly Apple should be allowed to sell onto the Kindle under the same rules. As should B&N.

I don't think forcing Apple to allow links to competing bookstores without the 30% cut is fair at all. Would you be OK if Barnes & Noble were forced to give shelf space to Amazon for free, without getting a cut of the sales?

That's because it's a punishment. Nobody claimed it had to -- or even should -- be fair and equitable.

Excellent! Now let's see them take on the App Store. The notion that Apple should be the single distribution vector for other peoples' intellectual property is odious, anticompetitive, and harms not only developers (30% for WHAT, exactly?) but also the public.

Oh, like Amazon does on the Kindle?

This ruling would be fair if it went both ways. Clearly Apple should be allowed to sell onto the Kindle under the same rules. As should B&N.

Why on earth should a punitive judgement be applied to people that weren't involved in the suit? That's as reasonable as you getting grounded when you brother broke curfew, just because your parents wanted to be fair.

Amazon is making the same play Walmart did, only this time on a bigger scale. Once Amazon is the only game in town, things aren't quite so pretty.

But there is no real estate/zoning issue in competing with Amazon as there is with Walmart: if someone wants to open an online store competing with Amazon they just have to register a domain and buy an SSL certificate.

Not sure what point you're trying to make, because Walmart didn't win by preventing other brick and mortar stores from setting up shop either. It was the pricing and deals with the distributors.

But let's run with your idea. I've got my domain name and SSL certificate. I'm ready to compete with Amazon for my share of the razor-thin margins on ebooks!

All I need to do in order to compete with Amazon effectively is sink money into most of the following: create book reading apps for every major platform; develop a full-featured catalog website with user reviews and comments and recommendations; bandwidth infrastructure to push purchased books to devices; credit card purchasing systems; television, print, and online advertising; affiliate programs; customer service; legal negotiations with all major publishers. Wouldn't hurt if I was able to sell at-cost book reader hardware hooked directly into my store.

I wonder, which of these costs the DOJ took into account when it deemed Amazon' e-books "consistently profitable"? I'm surprised more businesses aren't jumping into this market by the day!

I was unaware this is why I annoyingly couldn't purchase books directly through the app. Glad this is being fixed and addressing Apple's greed

It's not an issue of greed. Apple do not make much money from App Store content. And likely next-to-nothing from iBookstore content.

It's an issue of control. Apple wants the only buying experience on an iOS device to be the in-app purchase experience. They control the end-to-end user experience that way.

Apple are anal about having complete control over the user experience. The fact that they even allowed third-party applications on their devices at all was a surprise.

Try to understand that they care about money, but the vast majority of that money comes from device sales. Then understand that Apple strongly believes that it is their tight control over user experience that makes their devices sell so well.

So if they are concerned about this ruling, their concern would be that it lessens their control and has the potential to make their devices less desirable. (Though many here would argue that such a ruling makes Apple devices more desirable, that's not how Apple sees it.)

Excellent! Now let's see them take on the App Store. The notion that Apple should be the single distribution vector for other peoples' intellectual property is odious, anticompetitive, and harms not only developers (30% for WHAT, exactly?) but also the public.

Oh, like Amazon does on the Kindle?

This ruling would be fair if it went both ways. Clearly Apple should be allowed to sell onto the Kindle under the same rules. As should B&N.

That is actually a perfect comparison. Amazon does not try to enforce a similar rule. You can make a app that sells content to users, put it on their store, and not pay Amazon a dime. Apple can, they choose not to.

Amazon is making the same play Walmart did, only this time on a bigger scale. Once Amazon is the only game in town, things aren't quite so pretty.

But there is no real estate/zoning issue in competing with Amazon as there is with Walmart: if someone wants to open an online store competing with Amazon they just have to register a domain and buy an SSL certificate.

Not sure what point you're trying to make, because Walmart didn't win by preventing other brick and mortar stores from setting up shop either. It was the pricing and deals with the distributors.

But let's run with your idea. I've got my domain name and SSL certificate. I'm ready to compete with Amazon for my share of the razor-thin margins on ebooks!

All I need to do in order to compete with Amazon effectively is sink money into most of the following: create book reading apps for every major platform; develop a full-featured catalog website with user reviews and comments and recommendations; bandwidth infrastructure to push purchased books to devices; credit card purchasing systems; television, print, and online advertising; affiliate programs; customer service; legal negotiations with all major publishers. Wouldn't hurt if I was able to sell at-cost book reader hardware hooked directly into my store.

I wonder, which of these costs the DOJ took into account when it deemed Amazon' e-books "consistently profitable"? I'm surprised more businesses aren't jumping into this market by the day!

What is costs for you to set up and compete with Amazon (or WalMart, or anyone else, for that matter) is completely irrelevant to the question.

You can make the exact same argument that Apple is being illegally anti-competitive because you don't have the money to design a new computer system from the chip-level up, write software to run on your new hardware, develop supplier relationships to buy components, build a manufacturing plant and hire a few thousand people to operate it, launch a marketing program, and establish distribution channels to compete with them. That's a helluva lot of nerve for those guys in Cupertino to keep you out of the tablet computer business like that.

So when the mob does this they're prosecuted under the RICO Act and go to prison for 20 to life. Poor young men get busted for a few crummy joints and get 5 years in the pen. Some people are in prison for life on the asinine 3 strikes law for things as absurd as stealing a bike. And yet none of the suits involved in this criminal endeavor is prosecuted. Not even fired. Not even demoted. Not even a loss of bonuses. They just walk off between the rain drops scott free. They're probably out at this very moment drinking vats of scotch and doing rails off strippers asses, laughing about all of this.

A plutocracy is a wonderful thing isn't it? Hell, let's just do away with all civil and human rights for anyone who isn't rich! Let's go back to the good ol' days of the robber barons, child labor, and slavery! Hell, indentured servitude still exists. And for anyone who thinks this is somehow wrong, well we'll ship them off to gulags, er re-education centers to get them seeing things properly.

Poor young men get busted for a few crummy joints and get 5 years in the pen. Some people are in prison for life on the asinine 3 strikes law for things as absurd as stealing a bike.

First... I agree with the first part, pot should be legal and we should stop using it as a tool to get undesirables off the street when we can't find any other way to do it.

Second... Stealing a bike is not a strike under the three strikes law. And anyone doing time under three strikes deserves it. If you are stupid enough to get a single strike, then you should at least have the brains not to get 2 more. And if you got all three in one hit, then you really are dumb and should not have been doing anything that stupid to begin with. And even if stealing a bike were a third strike, anyone stealing a bike with 2 strikes on the record is too stupid to be free.

If Microsoft had a policy that said any Windows PC application that linked to an online store had to give MS a 30% cut of all sales, that would be completely unreasonable in my opinion, yet that's exactly what Apple was doing with iOS.

Yup, and it's also what MS is doing with Windows Store. Someone needs to stomp down this locked distribution model dreamhouse that Apple and MS have dreamt up for themselves (with the consumer's willing compliance).

the "overreaching proposal would establish a vague new compliance regime—applicable only to Apple—with intrusive oversight lasting for ten years, going far beyond the legal issues in this case, injuring competition and consumers, and violating basic principles of fairness and due process."

The competition allows its users to make in-app purchases without the nonsense you force in your OS.

The 30% cut from the Apps stores of devices IS somewhat different than the 30% cut off eBook apps.

It is double dipping in the later case, generally.

Generally if you are selling an App in the App store, Apple takes 30% cut and you (or at least the Publisher) takes the other 70%.

Amazon, B&N, etc with a book App through their own in app links were forced to give Apple 30% of the sale...but they also had to give a cut to the publisher too (30% in this case). So if B&N, Amazon, etc wanted the same profit margin on an IAP, they'd have to greatly increase the cost of the book, such that they wouldn't even be remotely competitive with iBooks.

This is what they yanked their sales links from the App. This is also why it is very fair that Apple can't force a commission on sales from within the Apps for books.

IAP in a regular App is sooooo much different from an eBook sale within an application (as it possibly would be for a magazine application too for that matter, unless the App was owned by the publisher of the magazine).

I mostly support the 30% take on iBooks, the App store, regular IAP. I don't support it on eBooks sales through eBook applications. I also don't really support it on eMagazine sales through applications. I also wouldn't support said same royalties to Apple on Music apps or video apps. I'd consider it a little more okay if the apps in question were the fronts for the publishers themselves.

Excellent! Now let's see them take on the App Store. The notion that Apple should be the single distribution vector for other peoples' intellectual property is odious, anticompetitive, and harms not only developers (30% for WHAT, exactly?) but also the public.

Oh, like Amazon does on the Kindle?

This ruling would be fair if it went both ways. Clearly Apple should be allowed to sell onto the Kindle under the same rules. As should B&N.

i really dont think there's anything stopping them from doing so. there are ibooks reader apps in the play store for android. apple tried to lock legimate vendors out of their walled garden, they failed. the less vendor lock-in any of these companies can get away with the better off we all are.

I was unaware this is why I annoyingly couldn't purchase books directly through the app. Glad this is being fixed and addressing Apple's greed

It's not an issue of greed. Apple do not make much money from App Store content. And likely next-to-nothing from iBookstore content.

It's an issue of control. Apple wants the only buying experience on an iOS device to be the in-app purchase experience. They control the end-to-end user experience that way.

Apple are anal about having complete control over the user experience. The fact that they even allowed third-party applications on their devices at all was a surprise.

Try to understand that they care about money, but the vast majority of that money comes from device sales. Then understand that Apple strongly believes that it is their tight control over user experience that makes their devices sell so well.

So if they are concerned about this ruling, their concern would be that it lessens their control and has the potential to make their devices less desirable. (Though many here would argue that such a ruling makes Apple devices more desirable, that's not how Apple sees it.)

Amazon had no issues selling their books through the Apple system. They had issue with Apple taking a 30% cut. If it was truly about control, they would have been happy when Amazon said "sure, we'll use your system", but Apple said "Pay us to use our system to sell things, even though we're letting you distribute your reader for free".

Adding more weight to this is them now saying "If we have to let them play for free, we just won't let them play at all." That's not control, that's greed.

Now the Government wants to legislate how companies do business for the sake of those poor poor customers who anyway have the right to not buy if they dont like the price.

DOJ are acting like thugs. Amazon is now entrenched due to government action. Guess the lobbying worked Amazon. Apple should now realise that only those who grease the hands of Government bullies can be left alone.

Idiot customers who are crying this is fair will soon realise what government intervention means and how it will soon entrench its fav. players in each field. After that polidictians will make election claims that they will bring ebook prices down or they will ensure chip makers place ads for their competitors in their chip markets. etc.. etc. .

Bravo dumb Americans!.

Yes, that actually is part of the purpose of Gov't in ANY society, is to control business (and control citizenry as well). Greater or lesser degrees of control abound though.

Also, it doesn't matter if it is a necessary good or a luxury good, if you are selling in an anti-competitive way, the gov't can step in and tell you to stop.

So, since you don't NEED gasoline, you are okay if the Gov't doesn't bother to regulate it anymore? I mean, you can walk can't you? What if all bookstores decided to hike the price of books 1,000%? You don't HAVE to read. I mean, if you wanted to...well too bad, because all bookstores just hiked the price of books 1,000%.

Or what about if all public transporation raised its price 1,000%? I mean, those people who were relying on it can buy themselves a car, or walk, or maybe ride a horse.

Or all movie theaters raised their price 1,000%? You don't have to watch movies.

Oh, and I'll add for the sake of making this the easiest possible scenario, this is with no external driver of price (IE the inputs to gasoline didn't go up. The paper to make books didn't suddenly skyrocket because some disease wiped out all trees on Earth, etc, etc).

So you think any of those actions are just completely fine and see ZERO reason the gov't shouldn't possibly step in because the collective actions of the companies in that industry are anti-consumer?

That's fine with me, but then I'd prefer not to live on the same Earth/in the same country you are running.

"...overreaching proposal would establish a vague new compliance regime—applicable only to Apple..."

Uh, yeah. Sort of the same logic as parole or probation - After its been determined that you've committed a crime society keeps a closer watch on you for awhile to make sure you're not on the path to re-offending. The victims of your crime do not have to report for parole or probation.

Now the Government wants to legislate how companies do business for the sake of those poor poor customers who anyway have the right to not buy if they dont like the price.

DOJ are acting like thugs. Amazon is now entrenched due to government action. Guess the lobbying worked Amazon. Apple should now realise that only those who grease the hands of Government bullies can be left alone.

Idiot customers who are crying this is fair will soon realise what government intervention means and how it will soon entrench its fav. players in each field. After that polidictians will make election claims that they will bring ebook prices down or they will ensure chip makers place ads for their competitors in their chip markets. etc.. etc. .

Bravo dumb Americans!.

The government did the right thing in this case. This only demonstrates that the private sector can not regulate itself to avoid the greedy temptation of ripping off and abusing the consumers . You have to be very dumb to have that kind of faith in the private sector or anything else.

Anything that inflates the prices is wrong and this is not just about rising your own prices. You can sell your lemonade at $20 per glass if you want, but if conspire with the other stands in the block to rise the prices at $20 then you clearly do not know what are you talking about with your nonsensical rant.

Meh, I've moved on from the Kindle Store. Will be interesting to see price competition again, but I doubt it would change which store I buy from. I still greatly prefer the iBooks app. I hope that Apple makes an app for the Kindle Fire just to mess with Amazon for this.

Confused though, book store links were never disallowed. Book sellers merely removed them in order to avoid paying Apple's cut, which admittedly was steep, but does this mean Apple can't get any money from sales made in book apps on their devices? Hmm, I'm a bit worried about what that will do to the ecosystem in general...

Apple set things up between their price fixing and in app purchase system so that other booksellers could not sell books through their apps and make any money. Forcing them to forgo their cut for a few years is a fair remediation.